Tech Selloff Extends On Hot Inflation Data, AI Spending Woes
Topline
A sharp and widespread tech stock selloff entered its second day on Thursday, with interest in semiconductor shares souring as a hotter-than-expected inflation report boosted Fed rate-hike fears and AI spending concerns continue to mount.
Key Facts
Tech stocks fell on Thursday after the opening bell, with Nvidia down 2.5%, Intel over 6%, SpaceX over 5%, Micron 4%, Dell over 9% and Broadcom 2.5%.
Chip flash memory maker Sandisk, one of the top-performing S&P 500 stocks for the year, fell nearly 7% on Thursday morning, and CoreWeave, which was down 15% on Wednesday as fears grew about its debt-funded AI infrastructure buildout, is down nearly 8%.
The Consumer Price Index rose 3.7% year-over-year, the Bureau of Labor Statistics reported Wednesday—deepening concerns that the Fed will again raise interest rates or keep them high for longer, making funding AI investments more pricey.
Anthropic reportedly told investors on Wednesday that third-quarter revenue rose 45% to $16.8 billion from $11.6 billion last quarter, reflecting substantial but slower growth than prior quarters when revenue more than doubled.
TSMC, the world’s largest contract semiconductor chipmaker, reported a 68.7% growth in net profit from a year earlier on Thursday, but despite beating estimates, global tech stocks continued to fall, with TSMC down 4%.
KEY BACKGROUND
September’s inflation data showed the rate is still way above the Fed’s 2% target, raising fears of a second interest rate hike. The AI spending boom relies heavily on borrowing money to finance expensive infrastructure, and rising rates would make these projects significantly more expensive. While Anthropic’s earnings grew significantly in the third quarter, it reflected a slowing pace of revenue growth which added to growing fears around substantial AI spending. Investors have grown increasingly concerned that the significant investment in data centers and chips won’t produce a clear or fast enough return on investment, and high inflation and Fed rate-hike concerns will surge debt servicing costs.
TANGENT
In the aftermath of Wednesday’s inflation report, the world’s wealthiest people, including Elon Musk, Larry Ellison and Mark Zuckerberg, lost billions of dollars as their companies’ stock dropped. Musk’s wealth fell by $17.6 billion in the morning, as Dell’s Michael Dell lost $15 billion, Oracle’s Larry Ellison lost around $11.2 billion, Meta’s Mark Zuckerberg lost $6.2 billion and Nvidia’s Jensen Huang lost $4 billion.